PETROLEUM. 91 



probably become clearer in the course of the ensuing discussion on its 

 applicability to the petroleum problem. In this respect, a con- 

 structive economic policy would come into effective play by seeking 

 out those aspects of the petroleum industry in which natural eco- 

 nomic law, as it now operates, has not led to sound development; it 

 would then, study those maladjustments and smooth them out by 

 appropriate measures so as to bring the entire resource activity into 

 effective operation. Sufficient, perhaps, has already been set forth 

 in this paper to make clear that the glaring flaws lie in the realm 

 of production and arise from the fact that the supply, due to various 

 factors, is out of adjustment with the demand. If these degrading 

 factors are permanently set aside, then the whole matter may be in- 

 trusted again, and this time safely, to the automatic regulation of 

 natural economic law. 



Lest a constructive economic policy be regarded as an unduly radi- 

 cal step, involving elements of greater danger than of prospective 

 advantage, we may examine more specifically what its course of 

 action would involve.^ The main lines of advance are clearly marked 

 out. They indicate that a constructive economic policy would dis- 

 courage unrestricted competition in production, provide for a taper- 

 ing use of oil for steam-raising, insure the development of petroleum 

 by-products, pave the way for the sound establishment of a shale-oil 

 industry, and stimulate the production of benzol and alcohol as motor 

 fuel. 



Discouragement of unrestricted competition in production. — ^We 

 have seen that the geological occurrence of oil leads to lavish pro- 

 duction, a tendency that is given extravagant license by the smaU- 

 unit competitive mining operations prevailing in this country. 

 Hence there has long been an overproduction of oil in respect to the 

 real needs of the country, with frequent spurts of gross overpro- 

 duction. In these circumstances lie the major causes of waste and 

 inferior utilization all along the line. By some means production 

 must be brought under the control of legitimate demand. A con- 

 structive policy, recognizing this desirability, will encourage a type 

 of development that will hold petroleum in the ground until it is 

 actually needed for high uses. 



The first step toward this end would logically be to disfavor small 

 holdings. In the case of the public lands, this could be accomplished 

 by appropriate legislation permitting the patent or lease of adequate 

 acreage.^ 



* In the case of private oil lands, either developed or in prospect, a 

 constructive policy will favor and facilitate integration, at least up 



^ Any action that harms either established Industry or the public Interest Is not con- 

 Btructlve. Such may be the criterion through the use of which a constructive economic 

 policy may safely be applied. 



a Bills now pending In Congress (H. R. 3232 and S. 2812) scarcely go far enough In 

 this direction. 



